The Law Society of Scotland has called for HSBC to suspend its mortgage conveyancing panel system warning of chaos in hundreds of property transactions.

In its warning statement, the Law Society is also critical of mortgage paperwork recently issued by HSBC which it believes is not fit for purpose and said documents issued by HSBC's solicitors is based on English, rather than Scots, law.

HSBC set up a severely restricted conveyancing panel last month, comprising just a handful of Scottish law firms who can carry out security work on behalf of the bank.

Prior to the change, any law firm in Scotland could carry out work for both the purchaser and mortgage lender.

Borrowers are now charged another s200 if they want their local solicitor to act in a purchase.

The Society warns documentation issued by HSBCs solicitors is based on English conveyancing law and requires solicitors for both the buyer and seller to grant undertakings which may be difficult if not impossible to honour.

It adds the purchaser's solicitor is also being asked to carry out additional work, much of which would be avoided if they were acting directly for the lender.

Over the past two weeks the Society said it has been "inundated with calls from concerned buyers and their solicitors".

Ross MacKay, convener of the Society's Property Law Committee, said: "We pointed out that this new system was wrong in principle and a month on it is becoming clear that it is also wrong in practice.

"It is failing home buyers who have chosen an HSBC mortgage. There is a risk that house sales will fall through and buyers will be left homeless and sellers without payment.

"We are therefore calling on the bank to immediately suspend the new system until there has been a full review and consultation with us to ensure that the paperwork is legally correct and workable and that the system does not penalise buyers and their agents."

A spokesman for HSBC said: "HSBC strongly believes that its conveyancing documentation is fit for purpose and has been drafted for use in Scotland.

“However we are keen to relieve the Law Society of Scotland of its concerns and we have offered to work with them to agree documentation which both parties are comfortable with.

“We are continuing to complete mortgage transactions as normal, however if customers do have any questions we would encourage them to speak with their HSBC Mortgage Manager."